10% to 11% VAT increase completed; further 1% rise to 12% in 2025
Indonesia has completed the first part of a two-stage VAT rise. From 1 April, VAT has increased from 10% to 11%. It will rise again to 12% in 2025.
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VAT rate rises as economy recovers from COVID-19
The increase in VAT is part of a set of reforms to broaden the tax base of southeast Asia’s largest economy. Despite ongoing COVID-19 pandemic issues, the economy grew in quarter 2 of 2021 for the first time in over a year. With some renewed confidence in consumer spending, the government had proposed the tax changes to the House of Representatives on 16 August 2021 as part of the 2022 budget.
Only Saudi Arabia and Nigeria have so far raised VAT rates in the wake of the coronavirus pandemic. Most other countries have temporarily reduced rates, particularly in the most hard hit sectors of tourism and hospitality.
Indonesia introduced Value Added Tax in 1984. There is registration threshold of IDR4.8billion, although there is scope for a voluntary VAT registration.
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